June 5, 2018 Blogs No Comments

The more India changes the more it looks the same.  The recent furore in media and the country about shortage of pulses and its consequent price rise reminds one of the mid-sixties. Those of us who were born earlier would remember the period of shortages which our country witnessed in the sixties and seventies. For persons  privileged to stand in line in front of  ration shops for buying Wheat, Rice and Sugar the current situation would look  like cakewalk.

The Sixties was the period when India was leaning very heavily on the Soviet Bloc and our policies were largely conditioned towards ensuring a square meal for everyone. Bollywood also was doing its  level best to paint traders in most lurid light.  Stocking of commodities was akin to committing murder and poor Stockists, symbolised by the potbellied Lalaji, was the source of all ills affecting society.  Politicians of all hue joined the chorus in passing on the buck for  their collective failures in implementing policies which were good for the Nation.  The result of all this was that we became a nation which was always fighting for survival instead of exploiting our own skills and resources.

The Essential Commodities Act which was promulgated in 1955 with the lofty objective of ensuring food for all at reasonable prices was a product of this flawed thinking and mindset. This single Act has ensured that free flow of goods within the Country is stymied and the orderly development of trade is seriously obstructed. This Act also has given rise to the Inspector Raj about which much has been written over the years.

Who is a Hoarder ?
In the eyes of the Law, anyone holding a specified commodity in excess of prescribed limit is a hoarder and liable to criminal prosecution. So far so good….Do our policy makers realise that the marketing of agricultural crops is normally limited to about 2 to 3 months after the  harvest.  In other words, the crop which is marketed for only 2/3 months in a year  and has to be consumed round the year, someone has to store the same.  Either the much maligned Hoarder or Stockist has to buy and stock for the whole year or the Government has to buy and hoard the stock. Would it not be a crazy idea when the Govt. ends up buying all agricultural produce in the country and then distributing the same?  If anyone believes that our Babus and Inspectors can do a better job than our poor Traders and Wholesalers then we can only pity his or her intelligence.

The country needs to redefine the meaning of the word Hoarder and come out of the Socialist Mindset.

Inspector Raj
One of the most important policy changes which happened with the opening up of our Economy in the Nineties was the doing away of Inspector Raj. The draconian Essential Commodities Act was given a decent burial in the nineties and trade and businesses heaved a sigh of relief.  However, this relief was short lived and at the first signs of spike in prices in early part of first decade the Act was again back with a bang.  I remember a conversation I had with a Senior bureaucrat who at his personal level was opposed to implementing this Act but had to bow to his Political masters.  To our politicians groomed in Socialist era ECA is the cure of reining in price rise .  The concerned  bureaucrat was smart enough to put a sunset clause at the time of re-imposition of the Act to ensure a natural lapsing after six months.  Tragedy is that politicians are smarter and this Act is back in force in all its glory and doing irreparable harm to our Trade and Commerce.

The power of the Inspectors has to be seen to be believed. They can haul up Directors of big Companies on a minor technical offence and put them behind bars like common criminals.  Is doing business a crime? Obviously no one wants to go through the motions of being harassed like criminals and this naturally results in more “Equitable” distribution of wealth…

Ease of Doing Business be dammed: What has gone wrong ?

  • Lack of Commercial Knowledge
    Our Economic Ministries have practically no domain experts who can give timely advice on unfolding scenario. Even if they have, the poor guy is so low down the pecking order that his word carries no weight. In the case of pulses the whole world dealing in pulses knew about the impending shortages but our policy makers slept over it and now are acting after the horses have bolted.  It is imperative that our Commercial Ministries have domain experts and their advice is acted upon. This will save a lot of blushes later.
  • Create Buffer Stock
    Govt. should create buffer stock of certain Essential Commodities apart from wheat and rice which can be released in times of runaway price rise. No harm in reducing the burdensome stocks of wheat and rice and increasing stocks of Pulses and maybe Onions.
  • Totally exempt imported materials
    Even though imported Pulses and Edible oils are exempt from Storage Control Orders ,still over enthusiastic inspectors seize stocks with impunity and get away with it. The poor importer has to run from pillar to post explaining that he has not committed any crime and loosing precious time and money in the bargain. All these actions of overzealous inspectors have the potential of choking the Supply Chain and the results could be disastrous in the long run.
  • Exempt Branded Goods
    All branded pulses, edible oils etc. should be totally kept out of the purview as it is a meaningless exercise.

Our Nation has long neglected agriculture. How can a country having GDP growth in excess of 7% afford to have less than 2% agricultural growth. This huge mismatch in growth numbers coupled with the fact that 60% of our population depends on agriculture is bound to create distortions. Its high time investment in improving Agri yields and creating adequate post-harvest handling infrastructure is seriously encouraged. Till this is not done we will have to live with periodic prices rises .


Credits : The Economics Times

Written by gap_admin